04 July 2007 15:41 [Source: ICIS news]
By Lucy Craymer
The two companies vie with each other for second place in the global epoxies market behind Dow. In ?xml:namespace>
Product overlap is considerable and a sell-off of assets would be expected if Hexion was successful in its $27.25/share bid for the
A combined group would have a monopoly in
Ian Butcher, a senior vice-president with consulants Kline & Co, said Hexion's overlaps with Huntsman in epoxy and related segments are synergies to be exploited.
"But there are major questions about whether this deal will get through the competition and regulatory authorities and how 'damaging' this process might be," he added.
"The question is how will the Huntsman board value the risk factor in accepting either the inflated, higher-risk offer or the lower, comparatively risk-free offer?"
Frost & Sullivan consultant Hariharan Ramasubramanian also suggested that Hexion would face regulatory scrutiny if its bid for Huntsman was accepted, given the consolidation in epoxy resins.
Huntsman said late on Tuesday that it had received a $27.25/share bid from Apollo, which owns specialties maker Hexion.
On 26 June, financier Len Blavatnik’s Access Industries made a $25.25/share offer for Huntsman though its Basell polyolefins business. The Basell offer was a 35% increase on Huntsman's closing share price of the previous day.
Huntsman said on 3 July that its transaction committee is continuing to evaluate the terms of the proposal and advisers are in discussion with Hexion about the bid.
A Basell spokesperson refused to comment on whether the company would increase its bid. However, an industry source suggested Basell was expected to raise its offer before the end of the week.
Hexion's $6bn bid is 8% higher than the bid Huntsman received from Basell last week, which was worth $5.4bn.
Hexion was formed by Apollo in 2005 by combining Resolution Performance Products, Resolution Specialty Materials and Borden Chemicals, which included resins maker Bakelite.
The company operates in four divisions: epoxy and resins; formaldehyde and forest products resins; coatings and inks; and performance products. First-quarter sales were up 17% at $1.4bn with epoxy and phenolic resins sales up 11% at $582m.
Huntsman has shifted its product portfolio away from commodity petrochemicals towards more specialised products such as epoxies and textile effect chemicals.
The sell-off of its North American petrochemicals business to Flint Hills Resources is expected to be completed by 1 August.
Huntsman bought Ciba Specialty Chemicals' textile effects business in 2006 having earlier acquired Ciba’s former epoxy operations, which were spun off as Vantico.
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